Fusion Fuel Green PLC (HTOO) Earnings Call Transcript & Summary

Hello, everyone. Welcome to Fusion Fuel Green Third Quarter 2022 Investor Update. My name is Benjamin Schwarz. I'm Head of Investor Relations at Fusion Fuel. I would like to first remind everyone this call may contain forward-looking statements, including, but not limited to, the company's expectations or predictions of financial and business performance which are based on numerous assumptions at our sales, margins, competitive factors, industry performance and other factors, which cannot be predicted. Forward-looking statements are inherently subject to risks, uncertainties and assumptions, and they are not guarantees of performance. I encourage you to read the disclaimer slide in the investor presentation for a discussion of the risks that may affect our business or may cause our assumptions to prove incorrect. The company has no obligation and expressly disclaims any obligation to update, alter or otherwise revise any do statements, whether as a result of new information, future events or otherwise, except as required by law. So, thank you all again for joining us today. I'll just quickly run through our agenda for the next hour. So we will kick things off with an overview of Fusion Fuel's value proposition. Then the management team will share -- actually look -- yes, we'll share third quarter highlights, financial results related to our commercial strategy, pipeline market expansion plans and finally, a very exciting technology update more than we visit our 2022 milestones before we're ending the presentation portion of the webcast with some brief closing remarks from Fusion Fuel's chairman. We'll then open up the floor for Q&A. [Operator Instructions]. So, let's begin with an overview of Fusion Fuel, what makes us unique, how we are creating value using fuel is in the business of developing and delivering cost-effective clean hydrogen solutions to accelerate the global energy transition. At its core, Fusion Fuel is an industrial technology company. We have developed and commercialized a proprietary miniaturized PEM electrolyzer that unlocks cost-competitive green hydrogen through unprecedented functionality, flexibility and scalability. The modularity of our electrolyzer technology lends itself to a decentralized approach, and we've leaned into that as a source of unique differentiation, where much of the market has gone down the path of ever larger scale electrolyzers to drive down their levelized cost we've gone in the other direction; small-scale mass produced. In doing so, we've been able to eliminate some of the cost and complexity of hydrogen production and distribution and deliver bespoke co-located solutions that few others can. So while others are talking about developing green hydrogen projects, we are doing it. Our unique approach and differentiated tech have enabled us to build a robust commercial pipeline of tech sales and development projects. We are producing green hydrogen today, our demonstration facility in Portugal with many more highly actual projects in various stages of the development cycle, including what will be Spain's first solar green hydrogen refueling station, which we're developing for Exolum in Madrid. So with that primer, I'll now pass it over to Frederico Figueira de Chaves, Fusion Fuel's CFO and Cohead for an update on the third quarter and subsequent events.

Thanks, Ben. Appreciate that, and thank you, everyone, for joining once again. As mentioned last time, we have received approval of a EUR 10 million grant from component 14 of Portugal's resilience and recovery plan for a project HEVO-Sines and also commenced work on our Exolum project in Madrid during the third quarter. In Spain, in addition to the opening -- to opening the Italian market with the Duferco energy agreements. We continue to make progress on securing grants for the projects we are involved in. Now this time into this little [indiscernible]. Two significant notes from earlier today and last week that are important for us. We've now disclosed our first project in the U.S. This is a project that has been in the works for several months now. And with the passage of the inflation reduction act, it's become a key strategic pillar for the company. Zach will dive deeper into this major milestone in a little while. Last week, we also introduced the HEVO-Chain. This is the first centralized electrolyzer for the company and is the first that we know in the market that is based on a series of miniaturized units working together in the string. We're extremely excited by this product. It not only opens new markets to us, but we believe it will also be a true disruptor for the PEM molecular hydrogen market in the coming years. During the third quarter, we booked an operating loss of EUR 5.5 million, driven by EUR 4.6 million of operating expenses. The increase in expenses from the second to the third quarter was largely driven by an increase in headcount, coinciding with the go live of Benavente and then the related tax provisions required in Portugal for the holiday subsidies pay for the employees. In addition, we incurred EUR 600,000 of one-off bookings related to EVRA and Exolum expenses and various larger activities related to marketing costs as well as various consulting and specialist engineering normalization work, the results of which we've disclosed in previous quarters. Going forward, we're adjusting our administration expenses guidance for around EUR 4 million to EUR 4.5 million per quarter for the fourth quarter and also for most of 2023. Our pretax profit loss for the quarter was again significantly impacted by the noncash item of the fair value movement of the outstanding warrants. This had a EUR 3.8 million positive impact, bringing our pretax loss for the quarter of EUR 1.6 million. One item I would like to highlight is that we expect to book revenues and also part of the P&L impact of the Exolum project during the third -- the fourth quarter of this year. So that's something to look for in the next quarterly update. We've added this slide to -- for additional transparency for our shareholders and analysts, we've added a slide covering with a summarized elements of our balance sheet into this -- to the financial section of our results, and we'll continue to provide this information going forward. As you can see, we have a total of EUR 61 million of total assets and around EUR 15.6 million of liabilities. Our property panels and equipment is mainly composed of our EVRA plants, HEVO-Sines projects and our Benavente facility. Regarding Benavente, several months ago, we initiated a process to do a sale leaseback of the property. We can now inform you that this is a transaction that we expect to close in December, which was -- will also generate substantial cash proceeds for the company. Important to note, we currently hold EUR 12 million of inventory and around EUR 3 million of advanced payments to suppliers. This is a result of measures taken late last year and at the beginning of 2022 to secure our supply chain. We've recently seen several cases where competitors were unable to deliver due to supply issues, and we have had the opportunity to step into projects in that base. Over the coming months, we will be working to transition this inventory into revenues and have a positive impact on our cash counts. Our receivables also included EUR 3.7 million, a broad -- awaiting payments of. In the third quarter, we continue to hold substantial VAT receivable balance of EUR 6.5 million. However, I'll highlight that we have submitted reimbursement requests for positive balance. These requests have been approved, and those inflows will be reflected in the fourth quarter. During Q3, we continued to pay for some material orders not only for inventory and for our EVRA and Exolum project as well as investments into our intellectual property and our EUR 4.6 million of operational expenses. Our liquidity position is something that we as a team have been actively managing for the various tools that are available to us, including, as mentioned, the reimbursement of our VAT and the ground receivables, the sale leaseback of Benavente and as all projects progressed traditional revenues. We are a company in an aggressive growth trajectory and the recent announcements and projects may require certain capital in the future. As we've noted before, we'll continue to consider all possible options for the company to ensure that we continue to execute along our growth plan -- our outstanding shares and warrants balance is relatively unchanged at 13.4 million shares. As announced at our last earnings release, during Q3, we did tap into the ATM facility and sold around 300,000 shares in average price of $7.35. During the fourth quarter, we also used the ATM facility to sold 400,000 shares at an average price of $4. Year-to-date, we have raised around EUR 3.7 million through the ATM facility at an average price of $6.3 per share. With the sale of these Benavente, the receivables mentioned in the previous slide and the other capital options being scored by the firm, in addition to normalizing of our product activity and revenues at the time, we expect to have less use of the ATM facility going forward. As highlighted previously, we have a strong track record of securing grants for our project portfolio. We have applied for nearly EUR 18 million of grants excluding our submissions. As of our last update, we had -- during a lot of update, we had EUR 19 million of grants approved and EUR 3.5 million grants investments already requested. As of today, we can share that we have secured another EUR 30 million of grants for another one of our projects. We expect to be able to disclose information regarding this award in the coming [indiscernible] relating to that, hopefully, for this week. As announced last week, we are technology providers for 4 projects in Spain who were pre-selected for grants. We expect to get into the final results of those submissions early in 2023. This grant portfolio and the related projects are very significant assets for the company and established a very strong basis for our order book for the coming years. That dive a little deeper into those. I will pass to Zach to share more information with you regarding our commercial activities.

Thank you, Frederico, and nice to see everyone and everyone that is in the U.S. I hope you had a great Thanksgiving weekend. We can go to next page, please. A key focus going to next year for Fusion Fuels to turn the dreams of the hydrogen market into reality. The market is being created, which requires projects to be permitted and attracting customers with providing attractive economics and confidence in our offering. We're targeting over $40 million in gross revenue next year. We plan to achieve this targeted technology to third-party technology sales to third-party customers and sell most of our existing Fusion Fuel owned projects to financial investors. We've been focused on de-risking our pipeline in 2023 and beyond by concentrating on a few key characteristics. First, does the project have the land secured; secondly, does it have grants; third, completing permitting; and finally, does it have a customer. These 4 characteristics as simple as I may seem allow us to rank opportunities to have a high likelihood of reaching a final investment decision and lets us prioritize our resources appropriately. Virtually, our entire pipeline has grants and land secured for 2023. This allows for our pipeline to commence permitting and have a higher probability of reaching FID due to the fact that we can subsidize our projects via grants to make them more attractive to third-party customers. We received or started permitting on over 50% of our 2023 pipeline and the balance is planning to start. Permitting takes approximately 6 to 9 months to receive the necessary permits to reach FID. Our team is focused on initiating permitting on the balance of our 2023 pipeline by the end of Q1 2023. Next year's pipeline is broken down by approximately 1/3 being already established third-party customer sales and the balance of them are Fusion Fuel owned projects, which are all located in the Iberian Peninsula that we plan to sell to third parties. Having our 2023 pipeline being focused on Portugal and Spain allows for a higher chance of success due to our company has most of our employees located on the Iberian Peninsula. As we're focused on 2023, we're also looking ahead and expanding our reach into other core markets. We are excited to announce that we are expanding into North America and the Italian markets. Both markets have strong incentives, especially the inflation Reduction Act in the United States. We've secured early stage opportunities in California and Southern Italy, a total over 75 megawatts of capacity for 2024 and 2025 production. These projects, combined with the balance of our portfolio in Portugal is over 138 megawatts of HEVO-Solar and HEVO-chain units for 2024 and 2025. HEVO-Chain is a product that Frederico will go into next, but it's a new product that we have developed and will be in production in 2024. HEVO-Chain is our own centralized PEM electrolyzer that Fred will discuss shortly. To take advantage of the inflation Reduction Act in the U.S., our team is actively evaluating if we can supply units for USA projects from Benavente or do we need to build an additional production capacity in USA. This could be a step change in our production capacity due to the early successes that we've had so far and the massive increase in the total addressable market size entering the United States and Canadian markets. We believe our product offering, along with our approach will be attractive to third-party customers and financial investors to expand in these exciting markets. In summary, we have a strong plan to utilize our 2023 production capacity, focusing on a region that we know very well the Iberian Peninsula. And already, we've established anchor projects in 2 core exciting and strategic markets to ensure the growth in the future for the company. Increased [ reach ] technology sales, as I just noted, are focused on Iberian Peninsula. We have over 18 megawatts of capacity of projects that totaled 743 units with an estimated potential revenue of over EUR 45 million to Fusion Fuel that have EUR 15 million grants attached to those projects. We are concluding the construction, as Frederico just noted, of our first technology sale in Madrid with Exolum, have built a team to be able to execute our projects in this region, working closely with our third-party external partners. These capabilities allow us to either do a tech sale or a turnkey project that includes engineering, procurement of the balance of plant equipment, construction of the facility as well as the operations. This allows us to not only make returns on the tech sale, but also in the overall project and potentially recurring revenue from operations if we operate the facility. Our tech sales in Portugal are with the same company, KEME. Both projects have secured grants have the land and the first KEME project is already under environmental permit. Anticipate KEME 1 reaching FID in the first half of 2023. And as Frederico noted, we already have inventory available to execute this project. The Spanish portfolio has been preselected for the purchase program and finalizing their respective grants. These projects are going through a final evaluation to receive formal award of the grants, which is noted as a waiting grants on the table. We're focused on supporting these prospective projects and receiving their grants so they can initiate permitting in the first quarter of next year. Some of the projects do not require offtake because the company is the end-use customer or already has secured a customer. I cannot emphasize enough that, that helps de-risk the projects, knowing that they already have a customer in hand. Alcala is the most advanced project -- most advanced Spanish project and is finalizing permitting with anticipation of reaching FID in the first half of 2023. And again, we have inventory available for this project already to executed. Also, we have a backlog of projects for 2024, which include additional technology sales in Spain that also applied for other grant programs and the Duferco project in Italy and other products we're currently in negotiations on throughout North America and Europe. We have 2 key themes as we touched on the last investor call. First is that we are building a mobility backbone, not only in Portugal, but now in the Iberian Peninsula. Second is decarbonizing industrial applications to sell to customers throughout Iberia with our initial focus on the Sines region of Portugal. We secured grants and land for all the projects we plan to reach FID in 2023, which includes 2 mobility projects and 3 industrial focused projects. Our focus is to build out our footprint in the Sines region through 3 phases to reach a total capacity of 85 megawatts. Our first phase has already received its environmental permits and is finalizing feasibility phase to reach FID in the first half of 2023. And again, we have the inventory available to do these projects. Our second phase has initiated environmental permitting and is planned to reach FID in the second half of 2023. We continue to do prefeasibility work on the balance of our portfolio to be in a position to commence permitting in the coming months and reach FID in the second half of 2023. As noted on our last call, Portugal is the blueprint for the rest of the markets that we're currently focused on. This blueprint is already being utilized to build a pipeline of over 175 megawatts of development projects in California, Portugal and Spain for '24 and 2025. I cannot emphasize enough the -- how the expansion into North America is truly a game changer for Fusion Fuel. North America has significant momentum due to the IRA and infrastructure build that create hundreds of billions of dollars in subsidies for hydrogen and other renewables in clean tech manufacturing. Most of you already know this, but I will emphasize a anyways, these subsidies include a $3 per kilogram production tax credit to last up to 10 years, a 30% to possibly 40% investment tax credit on the capital cost of the solar components of the project, billions in subsidies for clean tech manufacturing and development of hydrogen hubs to further advance the growth of key areas of hydrogen production and demand in the United States. We also have significant state-level subsidies such as the low carbon fuel standard credit in California focused on the mobility industry. Lastly, Canada has also recently announced a 40% investment tax credit for the upfront capital cost of hydrogen production, which makes Canada a very attractive market for Fusion Fuels HEVO-Chain product we plan to roll out in 2024. This legislation, combined with our expanded technology offering, creates a strategic shift in our focus to accelerate our plans to grow in North America for 2023. Securing our first project in North America and Southern California was strategic due to our technology offering and maximizing the incentives to have the highest likelihood of reaching a successful FID. Our first project is in partnership of Electus Energy, a developer of hydrogen projects with operations in California. We're excited to work with Electus, which brings commercial relationships and boots on the ground in California. Our first project is planned to be 75 megawatts of capacity of green hydrogen production located on 320 acres in Bakersfield, California off of Interstate 5. Bakersfield is a strategic first location due to its existing heavy industry and located to nearby distribution facilities that connect to areas such as Los Angeles. We've commenced pre-feasibility work with Black & Veatch as a lead contractor and we'll update as we make progress on this exciting development project. Our target is to have an FID on this project in 2024 and have commercial operations in 2025. We're actively building out our team in North America to be able to execute this opportunity as well as identify and secure additional opportunities in 2023. We believe the announcement of HEVO-chain expands the market opportunity significantly for us in the U.S. and Canada, specifically in markets such as Northeast and Pacific Northwest of the United States and British Columbia and Ontario provinces in Canada. These markets have existing or planned hydrogen incentives that make them attractive markets to apply the HEVO-Chain technology. The size of Bakersfield project alone justifies building a new manufacturing facility in particular for the HEVO component. As this project matures to reach a final investment decision along with other projects in our pipeline, we'll need manufacturing capacity in the U.S. to be able to obtain the benefits from the IRA the majority of the equipment that you produce has been made in the U.S.A. We're in the early stages of identifying our needs and starting to look for possible locations of putting a manufacturing facility or 2 in North America. This growth would be an increase of our existing business plan for Benavente. We're excited about the challenge to grow in such an important market in the United States and Canada. We are also excited to have expanded the Italian markets. We think that the Italian market is a natural expansion of our core and strategic markets in Europe due to its excellent solar radiance, existing natural gas infrastructure and ambition at hydrogen production in the coming years. Italy also has an existing natural gas grid from Northern Africa to Southern Italy and is seeking to by 2030 at a significant increase in hydrogen used for heavy industries and long-distance truck transport. This is ideal for Fusion's mobility and industrial decarbonization strategies we are already employing in the Iberian Peninsula. Our partnership with the Duferco Energia is exciting because the Duferco's core business is energy trading, steel manufacturing and shipping businesses. The joint agreement has been established between the Duferco and Fusion Fuel with the following goals to develop a footprint in Italy and the MENA region for technology sales and product development. Fusion Fuel will utilize the Duferco's existing operations and will be the boots on the ground for our expansion to Italy and possibly Algeria and Tunisia. An interesting aspect of Algeria and Tunisia is that there's an existing pipeline that connects Northern Africa to the Italian markets. And the other interesting part of the deferred significant operations in both those regions. We perfectly start any partnership is a focus on a project and execute it. We're doing this through the development of a pilot plant in the Duferco's Giammoro site in Sicily, we plan to install 50 HEVO solar units or the green hydro will be used to feed a multi carbonate fuel cell system that the technology at Duferco wants to test. The project is planned to be installed during 2024 will allow us to showcase the HEVO solar potential in a strategic [indiscernible] following our successful strategy in Iberia, Fusion Fuel will now use the same blueprint as I noted earlier, in mobility and the industrial segments. Our target is to have up to 4 mobility hydrogen-fueling stations in Southern Italy by the end of 2024. Separately, you see Northern Italy in areas such as Bologna, Brescia, Verona and Rodina, a key area similar to Sines, the focus on decarbonizing the steel, glass, ceramic and refinery industries as examples. These are ideal locations for our new HEVO chain technology that can scale with our customers, decentralized or co-located and more efficient than our peers. We'll work with the force to use this technology at the breast of the steel mill as one of the initial targets in this region. I'll now pass it back to Frederico to go through our exciting new technology developments of the HEVO chain.

Great, thanks, Zach. So Innovation Hub hasn't stopped as Fusion Fuel and obviously Zach and the team and the whole commercial area is keeping us well on our toes with all these opportunities. So I'm happy to be able to share with you some of the brief things that he has been working on today. So for those of you who have followed our story for some time, you know that this all began with our first generation of our miniaturized PEM electrolyzers HEVO. This 2020 model was a one bar of pressure and acquired 664 HEVO'S per HEVO-solar unit. We then consolidated 3 HEVOs into one in 2021, and this is the model that's been installed in EVRA. This year, we further consolidated our HEVOs that we only require 144 per HEVO-solar. This version while still taking advantage of the cost benefits of the miniaturized system can work with 4 bars pressure and has an increase hydrogen output and a 50% cost reduction from the 2021 version. We're already in testing of the 2023 version of the HEVO. This not only sees further consolidation, but still maintaining overall similar size, but it is able to work with 2 membranes per unit, committing us to improve the performance further and also reduce unit cost by another 20%. This 2023 unit is not only highly competitive, it's also a game changer for Fusion Fuel. We've recently taken the step into the -- into a new market for us, the centralized PEM market. Using this 2023 HEVO, we've connected several units on an integrated strain of miniaturized and molecules. With this, we've created a modular system that is easy to install and operate and can work in sight to limited available space. It's able to work with any energy source, thereby broadening our addressable market substantially and no longer limiting us to markets with high solar radiation. This system takes advantage of the attractive cost benefits of using a miniaturized system, which we've covered before. This allows us to bring -- to make even small systems cost-effective rather than the one could be seen in the market today, where electrolyzers need to be very large to be cost efficient. We are bringing affordable hydrogen solutions even for small-scale uses. As it is modular, it's also easily scalable, making us competitive already with our first generation to many different types of projects. All of this together gives us the HEVO chain, a truly revolutionary product in the hydrogen market. Now we'll show you a short video on the technology. Our HEVO chain solution is able to work with any energy source, making green hydrogen from any renewable energy. This is a start new world for Fusion Fuel and a very exciting one as well. It is a solution that can be containerized and usable for small to large scale use cases. It's all based on our HEVO miniaturized PEM solution all working in tandem on a strain. The system is easy to install, highly modular and highly efficient. By using our HEVO, we can make the most of our cost-efficient design to bring a highly competitive products to the market. We believe this will truly disrupt a lot of the existing small -- especially small and midsized projects in the market today. What you're seeing here is a real life version of the HEVO-Chain unit that's in our lab. We're running tests to be able to bring this to market in 2024. We need to first thoroughly test the system and then industrialize it for production. This solution will truly revolutionize the centralized electrolyzer market. The HEVO-Chain hydrogen unit, which I have with me here today, is on my table to see us right now next to me [indiscernible] is made of 15 HEVOs all integrated and linked but operating independently. [indiscernible] interact to be able to service larger projects. It bodes one of the highest efficiency rates for PEM systems today. Again, this is all based on what we learned in the creation of the HEVO-Solar. This new addition to our product portfolio, puts us in a strong position to be competitive for a wide range of projects, focusing the HEVO-solar on projects with large scale grants, land availability and very high solar radiation and the HEVO-Chain on markets with land constraints and requiring a range of energy sources. In 2022, we developed the first HEVO-Chain hydrogen unit and by next here, allowing us to now begin finding projects using this technology. The first version uses the existing water and power systems from the HEVO-Solar and the HEVO technologies. In 2023, we will subject the hydrogen units to further testing and also focus on making the water and power systems suitable for inclusion in the right of container solutions. In 2024, we expect to start industrial production of the HEVO-Chain and commercial operations, offering both right and containerized solutions. In order to do this, we will start signing projects and kicking off the required licensing and permitting processes for these projects already in 2023. And to briefly update you also on our production status and our Benavente facility, but we continue to ramp up production of the HEVO-[indiscernible]. We currently hold EUR 12 million of inventory, as I mentioned previously, together with another EUR 3 million of prepaid orders to suppliers. This puts us in a very strong position to be able to deliver products to our projects, as Zach mentioned earlier, and in several cases, even step in where competitors have not been able to deliver. This significantly de-risks our 2023 production and also project portfolio. In the first half of 2023, we expect to install and start activities on both our solar concentration and module production lines in Benavente to complement the existing HEVO production line, and we want to have Benavente with a 100 megawatt annual production capacity by year-end. In 2024, we expect to install and operate our HEVO-Chain production line and gradually increase our production capacity by the end of 2025, we reached 500 megawatts of annual production capacity and going into 2026. As always, we'll close covering our main milestones. But to note, we continue to make strong progress across all fronts of our major milestones for the year, all while significantly ramping up our team and ensuring the company operates smoothly as one unit. Whereas we would have liked to have seen faster developments in licensing and permitting processes for some of our projects in some of our markets. We've been positively surprised that the large movements governments around the world are making in the hydrogen market, building up significant momentum for the industry. For us, the IRA in the U.S. in particular, was a strong game changer in the hydrogen market, and we could not be more thrilled about the timing of our entry into this region with the biggest steel project. The introduction of the HEVO-Chain is also another product that is likely to have profound positive impact on the company, both in terms of the market available to us as well as holding solutions in the past, we simply had to pass up on. We're ramping up to close 2022 in a very strong position for the upcoming years. So with that, I'll pass to our Chairman for some closing remarks before moving on to Q&A. Thank you.

Thanks, Frederico. This investor presentation has been chock-full of important developments at Fusion Fuel. Therefore, I'm sure we're going to have lots of questions, so I'll not take up much of your time. Quarter after quarter, in my remarks, I've emphasized that what has been my formula for success as an investor, finding companies with a strong management team, a differentiable and superior technology and serving a growing market. As I read Wall Street research discussing Europe's impending economic winter of discontent, the uncertain timing of any relaxation of China's COVID zero policy and the likelihood that the Federal Reserve will need to bring on a recession in order to break the back of inflation in the U.S. I'm greatly comforted knowing that Fusion Fuel operates in a market that is, and for the foreseeable future will be the beneficiary of huge tailwinds. The financial incentives for green hydrogen, which will exist for years to come in both Europe and North America, give me the confidence to say that despite the highly uncertain global macroeconomic environment, which most businesses are facing, the market opportunity for Fusion Fuel has never been brighter. With that, I'll turn it back to you for Q&A Ben.

We'll begin with a couple of questions from [ Chris Tong from One Research ]. With respect to the breakdown of revenue between HEVO-Solar and HEVO-Chain looking out into the latter half of the decade. Can you provide any guidance as to which product would likely be Fusion Fuel's main source of revenue by 2025 for that 2030.

Frederico, do you want to take that one?

Sure, absolutely. So from our side, obviously, in the short run, HEVO-Solar will be taking the bulk of that, given that that's the production facility available. But in the future, as we ramp up, most likely HEVO-Chain will likely overtake HEVO-Solar. The target addressable market is much larger for the HEVO-Chain opportunity. Again, it's not limited by solar radiation nor by land [indiscernible] and niches. Just that the available market for the HEVO-Chain is just that much larger.

Just a follow-on question. Are there any plans to introduce other products across the hydro production chain?

So from our side, we're currently obviously playing still on the advantages of the HEVO with a miniaturized electrolyzer. We'll continue to look at solutions that could operate with that as its space. No accident that one is called HEVO-Solar and the other one is called HEVO-Chain. HEVO is the base of both. We don't foresee in the short term any product that is not HEVO-centric, although there may be variations of solutions that could combine the HEVO. But primarily, we see the HEVO-Solar and HEVO-Chain are our 2 major products, at least for the midterm.

And certainly, Frederico, the potential to add the oxygen capture system is -- it would be incremental revenue.

Absolutely. Very good point.

I thought you'd give the commercial for the H2 Pioneros program in Spain, that was announced the other week. Is it all or nothing for the full projects for which fusion-fuel is involved as a technology supplier? Or can one project be selected while the other 3 are not?

It's the latter. So every project stands on its own. If the one project moved forward and receive the grants in the other 3 did not, we would still move forward with the one project as a third-party technology sale.

There's a subsequent question about breaking up the number of HEVO-Solar for each project. I suspect we will disclose that information.

That's correct.

Bakersfield likely be a HEVO-Chain and HEVO-Solar?

Was that the question will be a mix of -- the connection kind of broke up.

The question was whether we anticipate Bakersfield being a mix of HEVO-Chain or HEVO-Solar or one or the other?

So we've engaged Black & Veatch to do the initial conceptual study and pre-feasibility work. We are going to evaluate both options. Do we do a HEVO-Solar project? Or do we do a centralized or centralized HEVO-Chain with traditional solar or a combination thereof. So we'll update you on the progress of that as we get closer.

There's another question about milestones in order to take FID on that project, but I suspect that your answer update is not going to be -- is answered that as well.

Just touch on that for a second. I mean we're -- so -- as we've noted in previous calls, we put in concept, pre-feed, feed and then the FID, final investment decisions. So we're in the concept stage of this project in the coming months. We hope to make a decision to move into prefeasibility, which we would start -- we initiate permitting on the project, but we are -- and hopefully, we can make an update on that in our next quarterly call.

Can you touch on the JV with Electus Energy? Is the 50-50 JV? And then additionally, with respect to funding that project given the hefty price tag, how we plan on funding the expected capital investment would it come from cash or other?

We are planning to have a 50-50 joint venture on the project. We have a current arrangement on funding the development costs of the project. And as we -- and we are already in active discussions with our own financial investors to kind of come in and partner with us on that project. So the plan is as we get closer to reaching FID will lock down and secure our financing for our position, which, as I noted earlier, we'd sell the technology -- we will sell our units too. So it looks like a third-party technology sale with equity upside. And then Electus has arranged their own financing for their position.

And I just want to just emphasize how attractive the economics of we expect this Bakersfield project to be. And so we think that the ability to get this financed will not be particularly challenging. The IRA and the California low carbon fuel standards really make this a very, very attractive project.

Last question here from One Research. Touching on the partnership with Duferco, is the agreement final for the 50 HEVO-solar pilot project in Sicily? Or is that not yet a committed order?

Good. We're working jointly with them to develop a -- do the engineering work to submit for an upcoming grant program in Italy. The plan is once after we submitted the grant feel entered into a third-party technology sale agreement with them. Right now, it's under a memorandum understanding or letter of intent, but we plan to convert that into a binding agreement in the coming months.

Great. A couple of questions here from Erwan Kerouredan from Royal Bank of Canada. [indiscernible] using commercial operation date as guidance for the revenue recognition timeline? Or will we be recognizing revenue prior to that date?